Consumer protection agency asks U.S. Supreme Court to review case that struck down its funding

(Reuters) – The U.S. Consumer Financial Protection Bureau has asked the U.S. Supreme Court to overturn an appeals court ruling that found the agency’s funding structure unconstitutional, saying that the decision “threatens to inflict immense legal and practical harm” on consumers and the financial sector. .

The petition filed Monday challenges a ruling by the 5th U.S. Circuit Court of Appeals last month that the agency said it “questioned virtually all” of the CFPB’s actions since the agency’s inception in 2011.

The agency said it filed its motion less than a month after the ruling so the Supreme Court could hear the case in its current term.

Cases that the Supreme Court agrees to hear after mid-January are generally not heard until the next term begins in October.

The case stems from a challenge by two payday lending groups who have sued to strike down a CFPB rule aimed at combating what the agency calls “unfair and abusive” practices in the industry.

The 5th Circuit struck down the rule on October 19, finding that independent funding of the CFPB by the Federal Reserve, rather than budgets passed by Congress, violated the separation of powers principle in the U.S. Constitution.

The CFPB said in its petition that the 5th Circuit “was relying on an unprecedented and flawed understanding” of the US Constitution’s Appropriations Clause, which requires government spending to be authorized by Congress.

“Congress has enacted legislation explicitly authorizing the CFPB to use a specified amount of funds from a specified source for specific purposes. The appropriations clause requires nothing more,” the agency said.

Congress created the CFPB in 2010 through the passage of the Dodd-Frank Act under President Barack Obama, a Democrat, in response to the 2008 financial crisis.

Republicans have long opposed the agency. The Supreme Court ruled in 2020 in a separate case that the protection Congress originally gave the CFPB director, who could only be fired for cause, was unconstitutional.

The case is Consumer Financial Protection Bureau v. Community Financial Services Association of America Ltd, United States Supreme Court, No. 22-448.

For the CFPB: Solicitor General Elizabeth Prelogar

Our standards: The Thomson Reuters Trust Principles.